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Information obtained by Regina Water Watch through a freedom of information request to the City of Regina reveals that the city-run “Vote No” campaign overspent its $340,000 budget by 20%, racking up $408,594.96 in costs during the referendum on the city’s wastewater treatment plant.

“With the city moving ahead with its P3, this is just the first instance of what will likely be a long list of cost overruns on this project,” says Regina Water Watch member Florence Stratton. “We’re afraid it’s going to be a long and costly 30 years for the citizens of Regina.”

According to statements made in August by city communications manager Deb McEwen, funding for the “Vote No” campaign was allocated from the city’s budget for the wastewater treatment plant upgrades, meaning the P3 privatization project has seen its first cost overrun before even selecting the consortium that will run the plant.

The City of Regina revealed in mid-October that the total cost to run the referendum was $356,000, well short of the $550,000 council set aside in the general reserve fund in August for the referendum. The budget for non-partisan voter information was originally set at between $100,000 – $120,000, but the actual amount spent on communications was under $80,000.

“It was bad enough that the City of Regina budgeted three times more taxpayers’ dollars to tell citizens how to vote, rather than where to vote; it’s even worse that it went way over the budget it gave itself without the democratic oversight of council approval,” said Stratton. “It’s a sad day for democracy when the city spends $50,000 more on a campaign of half-truths than it spends to run the entire referendum. It’s money that should have been spent to set up proper polling stations at seniors’ homes and to ensure that every resident received information about where to vote, something the mayor claimed the city couldn’t afford.”

In all, the ‘Vote No’ campaign spent almost three times the amount spent by the Regina Water Watch-led campaign to keep the plant public. In addition to the city’s campaign, the Regina and District Chamber of Commerce says it spent approximately $130,000 to support the city council-led campaign, and other organizations – including the Regina & Region Home Builders’ Association, the Saskatoon Chamber of Commerce, the Saskatoon Home Builders’ Association, and the North Saskatoon Business Association – spent undisclosed amounts on advertising during the campaign. The Canadian Union of Public Employees revealed it contributed $180,000 in support of the “Vote Yes” campaign.

You can view the city clerk’s breakdown of the city’s “Vote No” campaign costs here.

An article in the November 8 Regina Leader-Post about Mayor Fougere’s recent appearance in Toronto on a panel at the Canadian Council for Public-Private Partnerships conference quotes Fougere as saying that “We would never consider a P3 on water.” Fougere also commented that he can’t see “having another large project that would be a P3” in the near future.

Coming less than two months after 43% of Regina citizens voted in opposition to the P3 privatization of the city’s wastewater treatment plant, Fougere said that Regina is a five on a scale of one (not enthusiastic) to 10 (very enthusiastic) when it comes to P3s. Saying that “P3s are not a panacea and they’re not the solution for everything,” Fougere also stated that a P3 approach to the city’s $261 million in road construction would be “very difficult.”

The City of Regina has selected three private consortiums from the request for qualifications (RFQ) process to compete for the contract for Regina’s new P3 wastewater treatment plant. The consortiums selected to move into the request for proposal (RFP) phase are: EPCOR Saskatchewan Water Partners, Prairie Water Partners, and Wascana Environmental Partners.

According to city documents, even the two unsuccessful consortiums will each receive $250,000 of taxpayer money just for submitting a bid.

Edmonton-based EPCOR is the lead for EPCOR Saskatchewan Water Partners. Colorado-based CH2M Hill is the project lead for Prairie Water Partners. The “portfolio management firm” Fiera Axium Infrastructure is the project lead for Wascana Environmental Partners, with United Water (a subsidiary of the French water giant Suez) as the lead for operations and maintenance.

The Leader-Postreported that US Republican public relations firm Front Porch Strategies, which has been implicated in the Harper Conservatives’ robocall scandal, is taking a piece of the City’s $70,000 no-campaign robocall budget:

An American communications company is getting a piece of the city’s referendum campaign budget for its involvement in Mayor Michael Fougere’s telephone town halls.

Front Porch Strategies, based in Delaware, Ohio, was hired by the City of Regina’s polling firm, Direct Marketing Services in Saskatoon, to help carry out three teleforums, said the city’s communications manager Deb McEwen.

REGINA – Scrutineers in advance polls in Regina’s wastewater referendum have reported that polling clerks are instructing voters on how to answer the referendum question.

In at least two cases, a clerk offered the instruction, “Vote yes for Regina Water Watch, vote no for City Council,” while handing the ballot to voters. When Regina citizen Mary Arpin went to vote, the poll clerk gave unsolicited conflicting information, ending with the comment, “a 57 million dollar difference.”

Poll clerks are not allowed to indicate how a person should vote, nor to give information on behalf of either candidate or position. The comment clearly gave a voter the NO side messaging promoted by the City.

“This is deeply concerning,” said Regina Water Watch spokesperson Jim Holmes. “We’ve been getting reports of the City conducting secret polls at seniors’ complexes and care facilities around the city that we have been barred from observing. Have they been repeating the Mayor’s campaign messaging while handing out ballot cards? Will they be doing so when regular polls open on Wednesday?”

Regina Water Watch is calling on the City Clerk to get agreement before September 25 between Water Watch and the City administration on how the ballot question will be summarized for voters. The clerk should instruct all poll clerks that there should be no deviation.

One suggestion is “Vote YES means keeping the wastewater treatment plant publicly financed, operated and maintained; Vote NO means entering into a partnership with a private corporation that will finance, operate and maintain the plant for 30 years.”

“These sorts of irregularities could prejudice the results of the referendum. We call on the City Clerk to ensure that the Election Act is upheld,” says Holmes.

Holmes says that even more troubling are reports from the seniors’ residences where voters were not provided the legally required secret place to mark their ballot. At one residence Water Watch was only allowed to speak to residents days after the ballots had been distributed and mostly collected. Some residents claimed the Mayor had spoken to them immediately before the ballots were distributed. Regina Water Watch had requested to have observers present during all of the special polls, but was denied.

When asked in August, the City Clerk stated it would not be possible to send residents the usual voter card telling them their poll information. Holmes notes that the City has just sent out VOTE NO cards that tell voters how to vote, unlike regular poll cards telling them only where to vote.

Advance polls ran yesterday, with polls open across the city on Wednesday September 25.

It was a packed house at the University of Regina’s Education Auditorium for our event, Public vs P3 Privatization: Regina’s Watershed Moment, featuring Maude Barlow, Marley Weiser, and Pierre Hamel.

“A P3 is like an armour-plated marriage where you don’t know who will be in your bed,” Hamel, who takes issue with P3 promoters insisting that positive outcomes are a sure thing was quoted in a Leader Post article on the forum. “Who the hell is able to say for sure that the P3 is going to be something great?”

At a press conference held prior to the event, Council of Canadians Chairperson Maude Barlow warned Regina about voting no and ending up with a P3, saying, “If Regina goes ahead to privatize its water, I promise you in five years you’re going to be having a debate about how to undo this. It’s happening all over the world where communities have gone the private route [and] they’re sorry. When it’s a private company, they have to make a profit … and there are only so many ways you can do this. You have to raise water rates higher than the public rates … our you have to cut corners somewhere and you have to lay off the work force.”

Retired Environment Canada research scientist Marley Waiser disputed the city’s claim that the waste water system has nothing to do with water, pointing out that “at certain times of the year Wascana Creek is made up of almost 100 per cent treated sewage effluent.”

“The waste water can’t be separated from the stream flow, there’s just no way you can say that,” Waiser explained.

Negotiations to end the largest municipal P3 in Germany were finally concluded on September 10 with a deal by the Berlin government to spend €650 million (C$893 million) to buy back shares of the Berlin Water Company that have been in the hands of water giant Veolia since a P3 deal was signed in 1999.

A press release (translated from German) from the Berlin Water Table celebrated the end of the P3 by saying, “With the repurchase of shares of the Veolia Water Company, the Senate ended a nearly 14 year old partial privatization. This has left the people of Berlin, the highest water rates in the major German cities as well as a mountain of problems. The Berlin Water Table welcomes the municipal ownership.” The group was critical of the 54 million euro “golden handshake” that Veolia received from the city as part of the deal.

In 2012, Berlin paid a similar amount, roughly C$854 million to buy back shares from another private partner, RWE.

Following a successful petition drive, in February of 2011, over 665,000 Berlin citizens voted in favour of opening the contract to public scrutiny to disclose the full details of the P3. Details of the contract showed many problems, and a federal watchdog forced a cut in water rates of 18%, saying the P3 had been overcharging customers for years.

In the first 10 years of their operations, RWE and Veolia reportedly made €1.3 billion (US$1.64 billion) off of the Berlin Water Works.

One of the key arguments being made by the City of Regina and other P3 proponents is the notion of “risk transfer” from the public to the private sector under the P3 model. In this excellent blog post, Simon Enoch, Director of the Saskatchewan Office of the Canadian Centre for Policy Alternatives, explains the concept, and why Regina citizens need to be wary about the City of Regina’s claims about the value of “risk transfer.”

P3s and the risky business of risk transferBy Simon EnochAugust 23, 2013

Perhaps the most ubiquitous justification for the P3 model is the notion of “risk transfer.” The City of Regina’s argument for the P3 wastewater treatment plant borrows heavily on this argument, regularly touting the transfer of risk from the public to the private sector as a primary reason for the superiority of the P3 model. More recently, the Minister responsible for SaskBuilds, Don McMorris, also highlighted the argument of risk transfer while championing the proposed P3 Long-term care facility in Swift Current:

“I think the most important is they really do take on the risk of the whole facility through the time of the agreement, including the design and the build. You know there could be quite large escalations in costs. We don’t have to bear that as a government. That needs to be factored in by the winning proponent. Also issues on delays on construction. We get it at a certain time, and if we do not get that facility at the certain time there are extra penalties paid. So there are a number of benefits for government through the P3 model, most of which is it diverts the risk from government onto the private sector.”

So what is this much ballyhooed notion of risk transfer that is often the go-to argument in favour of the P3 model? Put simply, risk transfer is the cost of things going wrong. Risk transfer is the supposed amount of potential dollars in risk the government transfers to the private sector for things like cost-overruns, delays, etc, that might inflate the overall cost of the project were it solely in public hands. The government pays the private partner a “risk premium” in exchange for the private partner accepting responsibility for any cost inflation associated with the project.

So far so good. So what price should we put on such a risk transfer? This is where things can get dicey. How risks are monetized can be notoriously subjective, with empirical evidence rarely provided to “substantiate the risk allocations, making it difficult to assess their accuracy and validity.” The recent revelations from the Ontario Auditor-General’s report into the Brampton P3 hospital certainly supports this assessment, noting that “the “value for money” assessment was overestimated by $634 million, while the cost of construction using the P3 model nearly doubled. The value of “risk transfer,” the estimate of what it will cost the consortium to deliver the project on time, was also overestimated by a wide margin, according to McCarter. Proponents of P3s say risk transfer is one of the major benefits of this funding model.”

In an absolutely damning study of risk transfer for P3s – called private finance initiatives or PFI’s – in healthcare in the United Kingdom, Jean Shaoul and Allyson Pollock and Neil Vickers argue in the British Medical Journal that “risk transfer” is more an accounting trick designed to make the P3 model more attractive:

“What is striking, however, is that in all cases risk transfer almost equals the amount required to bridge the gap between the public sector comparator and the PFI. This suggests that the function of risk transfer is to disguise the true costs of PFI and to close the difference between private finance and the much lower costs of conventional public procurement and private finance.”

As economist Hugh Mackenzie illustrates in his study of the wastewater P3 model, the same dubious accounting appears in the Deloitte report justifying the P3 model:

“The public model had a cost advantage over the P3 model until Deloitte added in risk transfer. The application of Deloitte’s risk analysis system to the project changed those figures from an estimated total project base cost disadvantage for the DBFOM option of just over $26 million to a cost disadvantage of under $1 million after adding the values assigned to risk to each of the leading options.”

Mackenzie concludes, “this difference in risk cost is critical to Deloitte’s value for money conclusion. Without the assumed risk transfer, there is no value for money case.” Of course, how Deloitte came up with its risk transfer estimates that magically pushes the P3 model over the finish line ahead of the public option is impossible to know, as the entire risk analysis section of the full report has beenredacted. So we have no way of knowing if the risk estimates made by Deloitte are actually sound and reasonable or exaggerated and fanciful.

Of course the one risk that can never be transferred is statutory risk, or the ultimate risk for the project being completed. No matter what, the public sector is ultimately responsible for the provision of essential infrastructure and services undertaken by the P3 partner. Should the private partner decide to terminate the contract or declare bankruptcy, the government is obligated to finish the project – whatever the cost. Given we the public bear the ultimate risk for these projects, you would think we would have full access to the risk estimates the City is basing its decisions on. Or we could just take the City’s word for it. Care to risk it?

Simon Enoch is Director of the Saskatchewan Office of the Canadian Centre for Policy Alternatives.

The letter, sent this morning to Honourable Jim Reiter, states eight reasons that Regina Water Watch believes supervision of the election is needed.

“We’re very concerned. The City’s actions call for this extraordinary step because we can no longer trust them to ensure a fair referendum,” said Holmes.

The letter details concerns including conflict of interest with staff involvement, using taxpayers’ money to campaign, limiting voting for seniors and those with mobility issues to a mail-in ballot, and previous action by the City Clerk to attempt to increase petition signatures required at the eleventh hour and the decision to disallow 2,834 signatures because they did not include the date.

“There’s just been too many questionable incidents and decisions about the waste water referendum,” says Holmes. “This is an issue people care deeply about and we need to ensure the election is fair.”